The Pacific is a battleground of tech-geopolitics. China’s Space race might challenge U.S. dominance, while Trump seeks increase defence budgets from allies. Australia tied to AUKUS, must act—Labor’s caution risks irrelevance; a Liberal shift could align industry and security to counter rivals.
The Pacific has morphed into a battleground of technological and geopolitical ambition, where mastery of innovation will crown the dominant powers by 2035. China’s Shijian-25 satellite, launched in January 2025, marks a bold leap forward—on-orbit refueling and stealth capabilities that erode U.S. preeminence, as US Space Force’s Ron Lerch has cautioned with steely precision. Concurrently, the Trump administration’s recalibration, detailed in Forbes on March 11, 2025, pivots from lumbering defense giants like Lockheed Martin to the agile dynamism of SpaceX and Anduril.
For Australia, tethered to AUKUS and its pivotal Pacific destiny, this moment demands resolute action. The Albanese government’s tentative pace risks consigning the nation to irrelevance; a Liberal resurgence under Peter Dutton and Senator James Paterson could forge a formidable alliance of industry, security intelligence, and government to counter China’s ascent and align with U.S. expectations.
Yet, this transcends partisan divides—Australia must surge beyond the $10 billion slated for aerospace over the next decade, cultivating a critical technology ecosystem with national institutes and a private-sector equivalent to DARPA, the U.S.’s legendary Defense Advanced Research Projects Agency, to propel security, intelligence, and automation. Failure to invest decisively in AI, semiconductors, and space, while harnessing Australian industry and vetted global partners, will see us outmaneuvered by China and India, emerging titans vying for supremacy in the Pacific’s contested frontier.
China’s ascent reflects a calculated blend of ambition and precision, reshaping the Pacific’s strategic landscape with dual advances in space and sea. The Shijian-25, detailed by the South China Morning Post, achieves on-orbit refueling—a breakthrough that extends satellite longevity and redefines space economics—while stealth research and ambitions at 36,000 kilometers in geostationary orbit position Beijing for global leadership by 2050, fueled by Xi Jinping’s vision of a “space superpower.”
This aerospace prowess is mirrored by an intensifying naval presence—warships patrol Australia’s eastern shores, live-fire drills resonate across the Tasman Sea—solidifying dominance in the South Pacific and China Seas. With 67 launches in 2023 and 102 satellites deployed in late 2024, China’s integration of centralized control and commercial dynamism recalls the U.S.’s Cold War industrial peak.
This trajectory threatens to entangle allies in its infrastructure by 2035—a daunting prospect as China holds sway over 57 of 64 critical technology domains, compelling Australia to respond with urgency and foresight.
As China asserts its Pacific influence, The United States counters with a transformative defense strategy, a pivot chronicled by Forbes that relegates traditional heavyweights like Lockheed Martin (NYSE: LMT down 19% past 6M) and Huntington Ingalls (NYSE: HII down 26% past 6M) in favor of software-driven innovators such as SpaceX and Anduril. This shift, rooted in Trump’s “peace through strength” doctrine, is propelled by Defense Secretary Pete Hegseth’s March 7, 2025, directive for rapid procurement through Other Transactions and a new commercial DARPA-like entity.
DARPA, established in 1958 to outpace Soviet advances, revolutionized U.S. defense with trailblazing investments—the internet, GPS, stealth technology—cultivating a dynamic ecosystem of government-private collaboration that remains a benchmark for innovation. Hegseth’s 2025 initiative builds on this foundation, prioritizing space-based sensors for the “Iron Dome” missile defense program and unmanned systems to maintain a competitive edge.
Yet, with U.S. defense spending at a 75-year low of 2.9% GDP, scaling this transformation poses challenges. For Australia, this evolution offers a critical lesson: adaptation and investment are non-negotiable to keep pace in a Pacific defined by technological rivalry.
Australia’s strategic posture under the Albanese government rests on its AUKUS commitment—$368 billion for nuclear-powered submarines and $798 million in 2025 to support U.S. production—backed by 2% GDP spending ($22 billion) aimed at AI and robotics via Pillar 2. However, this framework is undermined by significant lapses, notably the 2023 cancellation of the National Space Mission for Earth Observation, which ASPI’s Bec Shrimpton condemned as a blow to Australia’s space capabilities, leaving its $34.2 million Space Agency a pale shadow of NASA’s $25.4 billion.
Compounding this, the Trump administration’s recent steel and aluminum tariffs signal a transactional shift, casting uncertainty over AUKUS’s submarine program. While President Trump’s apparent confusion about the pact has sparked concern, key figures like Hegseth and Secretary of State Marco Rubio affirm its value, offering cautious optimism. Still, these tariffs and Trump’s stance test Australia’s ability to influence this cornerstone alliance, prompting calls for greater self-reliance and diversified defense partnerships as a pragmatic “Plan B.”
This external pressure dovetails with internal vulnerabilities, where Senator James Paterson highlights a critical failure of strategic cohesion and intelligence distribution. Under Labor, key agencies—ASIO, AFP, ACIC, AUSTRAC, and NACC—report to the Attorney-General, a fragmented structure diverging from the Liberal-era Home Affairs model that unified intelligence, police, and border security. Paterson argues this disconnection severs coordination, weakening defenses against organized crime—drug cartels, human trafficking—and state-backed threats like cyberattacks and disinformation that erode democratic integrity.
The Senator's insistent demand to “change and integrate the machinery of government” envisions a Home Affairs-led consolidation, placing these agencies under one minister to align intelligence and enforcement strategies.
“We won’t be wasting time herding cats across multiple portfolios, or with complex inter-departmental committees. I can confirm that under a Dutton Coalition government, our key national security policy and operational agencies will be under one roof, working together seamlessly and reporting to one minister,” Sen. Patterson reaffirmed.
This would bolster resources, close gaps adversaries exploit, and enhance Five Eyes collaboration—a decisive improvement over Labor’s siloed approach, which industry and political observers deem ill-equipped for a contested era. With AUKUS under strain and domestic security faltering, Australia must recalibrate to safeguard its sovereignty and influence in the Asia-Pacific.
A Liberal victory in 2025, potentially elevating Peter Dutton to Prime Minister, James Paterson to Home Affairs Minister, and Andrew Hastie to Defence, could herald a transformative shift in Australia’s strategic trajectory. This leadership trio would face immediate pressure from the Trump administration, which, as Michael Green of the United States Studies Centre notes, is poised to enforce a hard line on allied defense spending.
Green warns that no U.S. ally will escape scrutiny for falling below the 2% GDP threshold—a benchmark Australia currently meets but which analysts, echoing Paterson’s focus on countering China and fortifying AUKUS technology, argue should rise to 3% by 2035, translating to $60–70 billion annually.
This aligns with Trump’s push for allied parity, a stance underscored by his administration’s recent steel and aluminum tariffs—25% on allies, 10% on China—that threatens Australia’s export-driven economy, which accounts for 48% of GDP (2023), amplifying the need for strategic self-sufficiency.
Industry analysts in both technology and defence, mindful of parallel developments across the U.S. and Europe, argue for increased expenditure coupled with a modernisation of security, intelligence, and defence capabilities. Central to their vision is the establishment of a private-sector “DARPA” to catalyse AI and robotics innovation, revive NSMEO, and elevate Australian-born critical technology and security firms—akin to EOS and CyberCX—into dominant players.
This plan includes building state-of-the-art engineering and AI-focused laboratories, staffed by a new generation of skilled talent, to bolster intelligence and defence industries. Taken together, these government-industry initiatives, inspired by the disciplined innovation seen in China, could significantly bolster Australia’s cyberspace resilience and capabilities across maritime, space and land domains.
Collaboration with trusted global partners—SpaceX, Palantir, BAE Systems—would fast-track this transformation, embedding Australian industry within AUKUS and broader international frameworks while fostering local expertise through joint ventures. Amid trade wars and tariff pressures, this push for self-reliance is not merely prudent but urgent, requiring a delicate calibration of U.S. alignment with economic stability.
Australia’s resilience hinges on a bold recalibration of its technological and defense priorities, far exceeding the $10 billion earmarked for aerospace over the next decade—a figure woefully inadequate in the face of escalating regional competition. This is not a matter of political preference; it is the bedrock of national survival in a Pacific where technological supremacy is the currency of power.
The race intensifies beyond China and the U.S., with India’s lunar ambitions poised to redefine space exploration and France’s satellite networks strengthening its South Pacific foothold—each nation vying to shape the region’s strategic future. By contrast, Australia’s digital economy offers a stark lesson in investment scale: over the past decade, banks, miners, and fintechs poured $15 billion into cloud computing and data centers, erecting digital strongholds in Sydney and Melbourne.
Forecasts project this to swell to $50 billion by 2035, fueled by a 10-15% annual growth rate as AI and quantum computing demands surge. If this torrent of capital continues to enrich private enterprise while aerospace, defense, and intelligence languish, the imbalance will stifle innovation, erode strategic autonomy, and squander opportunities to integrate private-sector ingenuity with government institutions—universities, research hubs, and national institutes like CSIRO—leaving critical industries exposed and underdeveloped.
To secure our space and sovereignty, a $20-30 billion commitment by 2035 is the minimum threshold. This includes multi-billion dollar budget to propel AI development, positioning Australia to rival Palantir’s data dominance and counter China’s “intelligentized” warfare capabilities; to establish a domestic semiconductor foundry, breaking free from foreign supply chain vulnerabilities that threaten both defense and economic stability; and $5 billion to resurrect the National Space Mission for Earth Observation (NSMEO) in collaboration with global partners, ensuring Australia’s orbital presence matches its Pacific ambitions by 2035.
Our National institutes like CSIRO and DST Group must spearhead this effort, forging a modern defense-industrial complex that integrates Australian firms—EOS, CyberCX—with vetted international leaders like SpaceX and BAE Systems. Parity with digital spending is not merely a fiscal goal; it is a national priority to safeguard sovereignty and project technological preeminence. Without this alignment, our strategic edge will erode, ceding ground to rivals who prioritize innovation as a cornerstone of power.
The Pacific’s future hangs in the balance, with China and India challenging regional primacy and the U.S. adapting—albeit with demands for allied resolve that Australia’s current 2% GDP spending and fractured framework fail to meet. By 2035, space and AI will dictate economic and military dominance—lunar resources, orbital control, and intelligent systems defining the new global order. Without a $30 billion decade-long surge, Australia risks fading into strategic obscurity, its sovereignty tethered to the ambitions of others.
The Albanese government’s hesitancy is a liability; a Liberal vision, galvanized by Senator James Paterson’s clarion call, must seize the helm. Paterson frames this as a democratic imperative, warning that without a minister wielding unified oversight—integrating ASIO, AFP, and other agencies under Home Affairs—Australia’s capacity to combat organized crime, digital interference, and threats to national sovereignty will crumble. This is no mere administrative tweak; it’s a strategic recalibration to fortify defenses, aligning intelligence and enforcement with a technology-driven industrial base.
This urgency is underscored by China’s rapid advances—DeepSeek AI announcement—a shot across the bow that reverberated like a “wake-up call” through Silicon Valley and beyond, signaling Beijing’s intent to compete and win in a contest Australia cannot afford to sit out. As industry participants, investors and participants we need political will to push for integration and modernization. This resonates as a welcome signal, demanding smart, robust politics to weave technology, economic policies, intelligence, and defense into a cohesive strategy for self-reliance by 2035.
This requires more than incremental funding; it demands a $30 billion injection to erect a private-sector "DARPA"—a catalyst for AI, cyber, autonomy, and space innovation—mirroring the U.S. model that birthed transformative technologies. Economic policies must incentivize domestic industry, redirecting the $50 billion digital windfall toward defense and intelligence, ensuring parity that underpins a resilient, prosperous Australia.
As Forbes highlights in 2025, citing the United States' defence priorities
“More than ever before, our nation’s (U.S) security relies on our military deploying new technologies like AI, cyber, autonomy and space—the industries of the future.”
Australia must rise to this challenge not as a mere participant, but as a commanding leader, forging a digital society rich in abundance and security—a beacon of freedom and democratic ideals in the Global South by 2050. This vision demands bold competition with trading partners and rivals, matching the ambition of China’s state-driven military might and India’s soaring space achievements, while aspiring to steward modern democracy through the first half of this century.
It is a call to redefine Australia’s ethos—self-reliant, innovative, and steadfast—proving to authoritarian nations that a democratic society can thrive with prosperity, opportunity, and principled alliance-building. Through ambitious investments and cohesive governance, we must cement our leadership over the next 25 years, emerging as a balanced, forward-looking economy and a model of modern aspiration by mid-century.
The effectiveness of government—from intelligence to industrial policy—will shape this path; fragmentation courts decline, while a united, resolute approach secures preeminence. This is our mandate: to craft a prosperous, secure Australia by 2035, or cede our future to others—there is no middle ground.
Xi Jinping’s summit signaled a shift, restoring business confidence. Alibaba’s $52B AI investment and ByteDance’s $21B push highlight China’s AI ambitions. With Beijing’s support, the nation is accelerating innovation on the global stage.
2025 sees AI giants and the proliferation of AI labs craft agentic systems, reshaping business and society. Anthropic’s $61.5B valuation fuels the race, while AI-to-AI communication boosts their reach. DeepSeek’s efficiency shows China countering U.S. dominance with affordable AI innovation.
In a new era of presidential power steering the AI economy, February’s briefings highlight OpenAI’s pivot to SoftBank, Apple’s $500B onshore tech push, Google’s antitrust woes, Nvidia’s uncertain record earnings, and Bybit’s $140M crypto bounty.
Xi Jinping signaled a shift in China’s approach to private tech firms, urging fair access and reduced financing hurdles. His remarks boosted confidence in Chinese tech stocks, with Alibaba jumping 3.2%. Analysts say China’s AI ambitions hinge on concrete policy changes rather than symbolic gestures.
